The Tenacity of the Bear
and the Shape of Things to Come
Worldwide ETFs Portfolio & Benchmarks vs Ursa Rank
7.2 years October 26, 2001-December 19, 2008
Weekly--Hypothetical
See Comments below
Chart current through December 25, 2008
Before we speak of tenacity, first define 'bear'.
The ancients spoke of the constellations Ursa Major and Ursa Minor, the Big Bear and the Little Bear.
The picture above is a little bear. It may even be two little bears. If these are two little bears, they are expressing the 42-month cycle (3.5 years). The first started with the low on October 18, 2002 and completed its full cycle with the low of July 18, 2006--45 months. The second low would be around January 2010 (42 months from the July 2006 bottom), give or take a few months.
This is tenacity? Not really. These are little bears, if anything. A tenacious bear has got to be big and usually extensive in duration. The current Big Bear qualifies. It really started in March 2000 (nine years ago), and it's still running. See the chart here. Its chief character actor was the Nasdaq (100)--down 82% by October 7, 2002. This echoed Japan's Big Bear (the Nikkei, down 80% as of October this year from its peak in 1989 (19 years ago!!). U.S. Real Estate followed Nasdaq downward starting in June 2006. It is likely that this cycle is an early stage, with further negative development ahead.
(Government rescue plans have nothing to do with this one way or the other. I'll get to that in another article.)
The 1929 Big Bear bottomed in three years, but took 25 years to exceed its former high level. The Big Bear which commenced in 1966 turned out to be a wide-swinging, trading range that exceeded its initial high by a few percentage points a couple of times, remaining firmly under water until 1982, 16 years later.
The point is, there is greater room and depth for more time and magnitude than the present market has embraced so far. It is observationable and probable. The larger context was posted here in August.
Fortunately, we are blessed with a systems approach to the markets. Better still, our systems have been designed to target, with some success, the roughly four-and-a-half-month half cycles inherent in market prices.
The Ursa rank curve at the bottom of the chart above is a tenacity meter, telling when prices are switching trends from down to up and vice versa. The ability to perceive and act on that is where the reward money waits.
It is a reverse indicator. When it drops, it indicates that prices will rise. When it rises, prices will drop. Look and see. Watch and wait.
Caveat. Applying simple reversals of Ursa's rank to trading decisions
has not been validated by adequate research and back testing. Therefore, in the meantime, caution in use is appropriate.
Written
12/26//2008 4:30 p.m. EST
Posted
12/28/2008 12:36 p.m. EST
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